The inconspicuous argument of the defendant employer, hidden among other objections, as part of the procedure for the performance of the non-compete clause, in which we represent the employees, made us think about the possible application of § 1766 of Act No. 89/2012 Coll., Civil Code, as amended (hereinafter just the "Civil Code") to obligations from the non-competition clause. In the given dispute, the employee who, after termination of the employment relationship for organizational reasons, observes the non-competition clause, claims the payment of the agreed reasonable compensation. The employer withdrew from the non-competition clause during the employment relationship, referring to the fact that the employee (female employee after taking annual parental leave) does not have information that would need to be protected through the non-competition clause. The non-competition clause did not regulate the possibility of withdrawal as a reason for the termination of the non-competition clause. In view of this fact [1] then the employer looked for other arguments to support the conclusion that he is not obliged to pay monetary compensation.
The employer's objection in the aforementioned case consisted in the fact that from the time the non-competition clause was negotiated to the time when the employer decided to withdraw from the non-competition clause, there was a substantial change in circumstances, which should have created a particularly gross disparity in the rights and obligations of both parties to the employment relationship, to the detriment of the employer . This objection was only raised during the court proceedings, less than two months before the end of the period for which the duration of the non-competition clause was agreed upon. According to the employer, the change in circumstances was caused by the fact that no confidential information is currently protected, as the employee has not had access to it for a long time. The employer proposed to the court to decide in accordance with Section 1766 on the cancellation of the obligation from the non-competition clause.[2] In this brief reflection, we will theoretically focus on the possibility of applying § 1766 of the Civil Code.
If, after the conclusion of the contract, the circumstances change to such an extent that the fulfillment of the contract becomes more difficult for one of the parties, this does not change anything in accordance with § 1764 of the Civil Code on its obligation to fulfill the debt. This rule is modified in the provisions of § 1765 and 1766 of the Civil Code. If there is a change in circumstances so significant that the change establishes a particularly gross disproportion in the rights and obligations of the parties by disadvantaging one of them either by a disproportionate increase in the costs of performance, or by a disproportionate reduction in the value of the object of performance, the affected party has the right to demand from the other party that negotiations on the contract be resumed . However, she needs to prove that she could not reasonably foresee or influence the change and that the fact occurred only after the conclusion of the contract (or became known to the affected party only after the conclusion of the contract). However, the exercise of this right does not automatically entitle the affected party to postpone performance and is not granted if the affected party has assumed the risk of a change in circumstances.
Finally, § 1766 of the Civil Code stipulates that if the initiative to renew negotiations does not lead to the goal pursued by the party affected by the change, the court may, at its proposal, decide to change the obligation from the contract by restoring the balance of rights and obligations of the parties, or to cancel it on the date and under the conditions specified in the decision. The court is not bound by the proposal of the parties. The court will reject the proposal to change the obligation, if the affected party did not exercise the right to renew negotiations on the contract within a reasonable period of time, after it had to discover the change in circumstances; this period is considered to be two months.
Since the Civil Code is subsidiarily applicable to Act No. 262/2006 Coll., the Labor Code, as amended (hereinafter referred to as the "Labor Code"),[3] the application of § 1764 to 1766 of the Civil Code to labor relations is not excluded.[4]
The non-competition clause in labor relations regulates the employee's obligation to refrain from competitive negotiations (specified in § 310, paragraph 1 of the Labor Code) towards the employer for a certain period of time after the end of the employment relationship, and the employer's obligation to pay the employee for the fulfillment of the agreed monetary compensation obligation. The employer's basic motivation for negotiating this commitment can be found in paragraph 2 of this provision. The prerequisite for negotiating a non-competition clause is the fairness of the obligation in relation to the employee, who should (there is such an assumption with regard to the type of work he will perform or is already performing) in the course of the employment relationship come into contact with information, knowledge, including knowledge related to working and technological procedures, the use of which in competitive activities after the end of the employment relationship could seriously complicate the employer's activities. Thus, when negotiating a non-competition clause, the employer assumes that it pays to protect the know-how or information in general to which the employee gains access, even at the cost of paying monetary compensation. If he comes to the conclusion that it will pay off, and the employee accepts this obligation because he is satisfied with the amount of consideration agreed in the non-compete clause, there is undoubtedly an obligation relationship with subjectively balanced rights and obligations of both parties.
After a certain period of time, the employer discovers that his assumption has not been fulfilled. The employee did not come into contact with such information that would need to be protected at the cost of a monetary settlement. The obligation is therefore unbalanced from his point of view, even in such a way that there is a gross disparity between rights and obligations. It is possible for him to apply § 1765, or § 1766 of the Civil Code?
The first important point of view is the point of time, i.e. during the effectiveness of which legal regulation of civil law the non-competition clause was concluded. The approach of Act No. 40/1964 Coll., the Civil Code, as amended on 31 December 12 (hereinafter referred to as the "original Civil Code") and the Civil Code is completely different.
According to the original Civil Code, except for some exceptional and expressly regulated cases, a change in circumstances after the conclusion of the contract was completely irrelevant, and the parties had to fulfill their contractual obligations even if the change in circumstances was so substantial that they would not have concluded the contract under these new circumstances. The rule set out in Sections 1765 and 1766 of the Civil Code cannot then be applied to contracts concluded under the effective date of the original Civil Code (Section 3028, paragraph 3 of the Civil Code). Therefore, if the non-competition clause was negotiated under the effectiveness of the original Civil Code, § 1765 et seq. does not apply. of the Civil Code without the express agreement of the employee and the employer being considered at all.
The re-opening of negotiations on the content of mutual rights and obligations in the sense of § 1765 of the Civil Code from a non-competition clause negotiated already before the Civil Code came into force comes into consideration in a situation where the change in circumstances is so substantial that it establishes a gross disparity between the rights and obligations of the employee and the employer. This gross disparity must manifest itself:
a) by a disproportionate increase in the costs of performance (this will probably not be considered in the case of a non-competition clause), or
b) by a disproportionate reduction in the value of the object of performance (here, in certain situations, one can imagine the reduction in value that the employer will receive for paying monetary compensation for compliance with the non-competition clause on the part of the employee).
At the same time, it must always be about a change in circumstances that will be substantial, unforeseeable and beyond the control of the affected party (i.e., in the given case, the employer). In view of the lack of case law on this issue, one can only speculate under what conditions the employer could successfully claim that there was such a change in circumstances that is sufficiently substantial, that he could not foresee or influence. The change would probably always have to be related to the amount and quality of information that should remain unavailable to the competition, or with the economic and economic situation in which the employer would find himself. However, it is hard to imagine that the employee's access to specific information or the development of the economic and economic situation in which the employer is located would be uninfluenced by him.
Even if we found a situation that would meet the above criteria, i.e. if the employer claimed and was able to prove that there was a substantial, unforeseeable and uncontrollable change in circumstances that caused the imbalance of mutual rights and obligations from the non-competition clause, this does not automatically mean that may deem the non-compete clause ineffective/automatically void. The consequence of the newly established disproportion is the establishment of the right to demand from the other party - the employee - the renewal of the contract negotiations, with the fact that, after its unsuccessful implementation (§ 1766 of the Labor Code), the right of the party affected by the disparity - the employer - to turn to the court with a proposal that either canceled the obligation or to restore the balance of rights and obligations of the parties. As mentioned above, the court is not bound by the parties' proposals. At the same time, the employer would have to start negotiations on changing the content of the contract within a reasonable period of time after discovering the change in circumstances (the law provides for a rebuttable presumption of two months). In contrast to the limitation of withdrawing from the non-competition clause, which the employer can only do until the end of the employment relationship, i.e. only before the non-competition clause enters into force, the exercise of the rights according to Sections 1765 and 1766 is not limited by this. However, even if the employer successfully asserts his right under § 1766 in court, since he would succeed in proving that the non-competition clause has undergone a substantial, unforeseeable and uncontrollable change in circumstances, the consequence of which is an imbalance in the rights and obligations of the employee and the employer, any change or even cancellation of the obligation from the non-competition clause would be effective ex nunc, i.e. only by the legal force of the court's decision.[5] Until then, both parties would continue to be obliged to fulfill their obligations, i.e. the employee to observe the prohibition of competition and the employer to pay monetary compensation. Exercising the right to change the obligation on the part of the employer only at the time when the non-competition clause is running will probably not lead to the desired reduction or cancellation of the obligation to pay monetary compensation.
Going back to the title of this short article and framing it as a question to try to answer, the answer will be rather negative. It is hard to imagine circumstances under which the employer could successfully exercise its right to obtain, first by negotiating with the employee and then in court, a change or cancellation of the non-competition clause obligation. Everything would probably have to take place during the duration of the employment relationship, because given the maximum possible duration of the non-competition clause and the average duration of the court case, it is clear that after the end of the employment relationship, the employer would not have time to make the change through a court decision.
Source: www.epravo.cz
The team of the Vych & Partners, s.r.o. law office
[1] The consistent jurisprudence of the Supreme Court of the Czech Republic, as well as the Constitutional Court of the Czech Republic, finds the withdrawal of the employer from the non-competition clause in a situation where the reasons for withdrawal have not been negotiated (and no legal reasons for withdrawal are given) to be an invalid legal act.
[2] The court proceedings are still ongoing, so the court has not yet decided on the employer's objection. For the sake of completeness, it should be noted that the employer used a number of other arguments in support of its legal conclusion that it is not obliged to pay monetary compensation from the non-compete clause. The subject of this article is not to analyze a specific case. We used its basic factual skeleton to embed theoretical considerations in a practical case.
[3] § 4 of the Labor Code
[4] The application of the Civil Code to labor relations must be in accordance with the basic principles of labor relations, which are regulated in § 1a of the Labor Code. In our opinion, these principles do not automatically exclude the application of § 1765 and 1766 of the Civil Code, but must be taken into account when assessing a specific case. Similar conclusions are also reached, e.g. JUDr. Jakub Morávek, Ph.D. in its state To selected aspects of the impact of the NOZ and the recodification of private law on the regulation of labor relations, available at http://www.spolpracsoc.cz/attachments/article/12/Moravek_vybrana_ustanoveni_NOZ.pdf
[5] Similarly, e.g. Doc. JUDr. Josef Kotásek, Ph.D., Notes on the circumstances establishing the right to renegotiate the contract, available at https://www.researchgate.net/publication/303922377_Poznamky_k_okolnostem_zakladajicim_pravo_na_obnovu_jednani_o_smlouve
